What changed in this filing

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Item 1A. Risk Factors

2023-02-15 compared with 2022-02-14 · 94 added, 115 removed, 335 unchanged (38% of the section changed)

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COVID-19 Related Risks

We must successfully manage the demand, supply, and operational challenges associated with the actual or perceived effects of the COVID-19 pandemic or any other disease outbreak, including epidemics, pandemics, or similar widespread public health concerns.

Our business may be unfavorably impacted by the fear of exposure to or actual effects of the ongoing COVID-19 pandemic or any other disease outbreak, epidemic, pandemic, or similar widespread public health concern, such as reduced travel or recommendations or mandates from governmental authorities to cease particular activities.

These impacts include, but are not limited to:

• Significant reductions or volatility in demand for one or more of our products, which may be caused by, among other things:

the temporary inability of consumers to purchase our products due to illness, store closures, school closures or delayed opening for schools and other higher education programs, quarantine or other travel restrictions, or financial hardship among customers, retailers and consumers, shifts in demand away from one or more of our more discretionary or higher priced products to lower priced products, or stockpiling;

if prolonged, such impacts can further increase the difficulty in planning our operations, which may adversely impact our results, liquidity and financial condition;

• Inability to meet our customers’ needs and achieve cost targets or cost inflation due to disruptions or shortages in our manufacturing operations, supply arrangements as well as distribution centers caused by the loss or disruption of essential manufacturing and supply elements such as raw materials or other finished product components, transportation, workforce, or other manufacturing and distribution capability including as a result of governmental mandates to close certain of our manufacturing and distribution facilities;

• Failure of third parties on which we rely, including our suppliers, contract manufacturers, distributors, contractors, commercial banks, joint venture partners and external business partners, to meet their obligations to the Company, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties, which may adversely impact our operations, liquidity and financial condition;

• Significant changes in the political and labor conditions in markets in which we manufacture, sell or distribute our products, including quarantines, governmental or regulatory actions, closures or other restrictions that limit or close our manufacturing, distribution, research and development and retail facilities;

restrict our employees’ ability or willingness to

travel or perform necessary business functions, or require employees and business partners to work remotely creating potential for risks related to cybersecurity, confidentiality and data privacy breaches, or otherwise prevent our facilities or our third-party partners, suppliers, or customers from sufficiently staffing operations, including operations necessary for the production, distribution, sale, and support of our products, which could adversely impact our results, liquidity and financial condition;

• The duration and sustainability of any improvements in COVID-19 conditions, which will be uncertain as continuing adverse impacts and/or the degree of improvement may vary dramatically by geography and by business;

the actions we take in response to any improvements in conditions, such as our return-to-office plans, may also vary widely by geography and by business and will likely be made with incomplete information, and may prove to be premature, incorrect or insufficient, and could have a material, adverse impact on our business and results of operations.

To the extent that the Company mandates vaccinations for its employees, as the Company currently plans for its U.S.

workforce, it is not possible to predict with certainty the exact impact on us or on our workforce.

Any such Company mandates could result in employee attrition, which could materially adversely affect future revenues and costs and have a material adverse effect on our business and results of operations.

There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change.

We do not yet know the full extent of the impacts on our business, our operations or the global economy as a whole.

Despite our efforts to manage and remedy these impacts to the Company, the ultimate impact of the COVID-19 pandemic could materially and adversely impact our business, results of operations, liquidity and financial condition, and depends on factors beyond our knowledge or control.

In this regard, the extent of the impact of the pandemic on our business, operating results, cash flows, liquidity and financial conditions will be primarily driven by the duration and severity of the COVID-19 pandemic, its impact on the U.S.

and global economies and the timing, scope and effectiveness of federal, state and local governmental plans to administer vaccines to the general public, especially in areas where new variants have emerged, conditions have worsened and lockdowns or travel bans are reinstituted.

The COVID-19 pandemic and related impacts has had, and could continue to have, an adverse effect on the Company’s business, financial condition and results of operations.

The ongoing COVID-19 pandemic, including the emergence of variants for which vaccines may not be effective, may negatively affect our business by causing or contributing to, among other things:

• Significant disruptions in our business operations and in the ability of significant third-party vendors, manufacturing and other business or commercial partners, including customers, to meet their obligations to us;

• Significant decrease or volatility in sales of or demand for our products due to any decreased demand for products, closure or reduced operating hours of our key customers;

consumer inability to purchase our products due to personal illness or government implemented restrictions and any resulting changes in consumer preferences;

• Worldwide, regional and local adverse economic and financial market conditions, including increased risk of inflation;

fluctuations in commodities, packaging, transportation and other input costs;

increased unemployment;

decreased disposable income;

declining consumer confidence;

or economic slowdowns or recessions in any of our major markets, all of which could impact the manufacturing operations of the Company or our third-party suppliers;

• Significant U.S.

or international governmental actions, or other limitations or restrictions, including restrictions on the ability of our employees, suppliers, customers or third-party partners to travel or perform necessary business functions or our ability to manufacture, ship, distribute, market or sell our products;

• Adverse impacts on our supply chain, including manufacturing by the Company or third-party partners, due to raw material, packaging or other supply shortages, labor shortages or reduced availability of air or other commercial transport, port congestion and closures.

Although we are unable to predict the impact on our ability to source materials in the future, we expect these and other supply chain pressures to continue into the coming year.

In addition, sustained labor shortages or increased turnover rates within our employee base, caused by COVID-19 or as a result of general macroeconomic factors, could lead to increased costs, such as increased wage rates to attract and retain employees, and could negatively affect our ability to efficiently operate our manufacturing and distribution facilities and overall business.

Even as efforts to contain the pandemic have made progress and some restrictions have relaxed, new variants of the virus are causing additional outbreaks.

The extent of COVID-19’s effect on our operational and financial performance in the future will depend on future developments, including the duration, spread and intensity of the pandemic, our continued ability to manufacture and distribute our products, any future government actions affecting consumers, our business operations, including any vaccine mandates, and the economy generally, changing economic conditions and any resulting inflationary impacts, all of which are uncertain and difficult to predict considering the rapidly evolving landscape.

Such impacts could materially adversely affect the Company’s business, financial condition and results of operations.

Industry and Economic Risks

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The Company also faces the risk of changes in the strategy or structure of its major customers, such as overall store and inventory reductions.

The intense competition in the traditional retail and e-commerce sectors may result in a number of customers experiencing financial difficulty or failing in the future.

To address these challenges, the Company must be able to respond to competitive factors, and the failure to respond effectively could result in a loss of sales, reduced profitability and a limited ability to recover cost increases through price increases.

The intense competition in the traditional retail and e-commerce sectors may result in a number of customers, such as Bed, Bath & Beyond, experiencing financial difficulty or failing in the future.

To address these challenges, the Company must be able to respond to competitive factors and the potential loss of customers in the future, and the failure to respond effectively could result in a loss of sales, reduced profitability and a limited ability to recover cost increases through price increases.

The Company’s customers may further consolidate, which could materially adversely affect the Company’s sales and margins.

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The Company’s sales are dependent on purchases by several large customers and any significant decline in these purchases or pressure from these customers to reduce prices could have a negative effect on the Company’s future financial performance.

The Company’s customer base is relatively fragmented.

Although the Company has long-established relationships with many customers, the Company generally does not have any long-term supply or binding contracts or guarantees of minimum purchases with its largest customers.

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In addition, because many of the Company’s costs are fixed, a reduction in customer demand due to decreased sales to end consumers could have an adverse effect on the Company’s gross profit margins and operating income.

The retail landscape in many of the Company’s markets continues to be impacted by the rapid growth of e-commerce retailers, changing consumer preferences (as consumers increasingly shop online) and the emergence of alternative retail channels, such as subscription services and direct-to-consumer businesses.

The retail landscape in many of the Company’s markets continues to be impacted by the rapid growth of e-commerce retailers, changing consumer preferences (including online shopping) and the emergence of alternative retail channels, such as subscription services and direct-to-consumer businesses.

The rapid growth in e-commerce and emergence of alternative retail channels may adversely affect the Company’s relationships with its key retailers, whereby the number of products it sells will no longer be a reliable indicator of the amount of future business the Company can expect.

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• improve customer service, such as with direct import programs, whereby product is supplied directly to retailers from third-party suppliers;

• adopt technologies related to inventory management such as Radio Frequency Identification, otherwise known as RFID technology, which may have substantial implementation costs.

• adopt new technologies including those related to inventory management such as Radio Frequency Identification, otherwise known as RFID technology, which may have substantial implementation costs.

The Company cannot provide any assurance that it can continue to successfully meet the needs of its customers or that customer demand will remain consistent.

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The Company also faces the risk that its competitors will introduce innovative new products that compete with the Company’s products.

In addition, sales generated by new products or line

extensions could cause a decline in sales of the Company’s existing products.

In addition, sales generated by new products or line extensions could cause a decline in sales of the Company’s existing products.

If new product development and commercialization efforts are not successful, the Company’s financial results could be adversely affected.

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The development and maintenance of such brands require significant investment in brand-building and marketing initiatives.

While the Company's advertising and promotion expense has increased in 2021, and the Company plans to increase such expenditures, along with other brand-building and marketing initiatives, over the long term, these initiatives may not deliver the anticipated results and the results of such initiatives may not cover the costs of the increased investment.

Over the long term, these initiatives may not deliver the anticipated results and the results of such initiatives may not cover the costs of the increased investment.

Failure to further expand the Company’s e-commerce business, despite increasing e-commerce investments, may materially and adversely affect the Company’s market position, net sales and financial performance.

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The Company is implementing various global initiatives in connection with the turnaround plan to reduce costs and improve cash flows.

For example, during the third quarter of 2021 the Company announced Project Ovid, a multi-year, customer centric supply chain initiative to transform its go-to-market capabilities in the U.S., improve customer service levels and drive operational efficiencies.

These initiatives are designed to reduce the complexity of the organization, improve the Company’s cash conversion cycle and increase investment in the Company’s most significant growth platforms.

These initiatives are further designed to reduce costs associated with direct materials, indirect expenses, and distribution and logistics, among other things.

These initiatives may not be completed substantially as planned, may be more costly to implement than expected, or may not result in, in full or in part, the positive effects anticipated.

Project Ovid is a multi-year, customer centric supply chain initiative to transform the Company's go-to-market capabilities in the U.S., improve customer service levels and drive operational efficiencies.

This initiative, which commenced its first phase go-live during the third quarter of 2022 and its second phase go-live in February 2023, is expected to leverage technology to further simplify the organization by harmonizing and automating processes.

This initiative is designed to reduce the complexity of the organization, improve the Company’s cash conversion cycle and increase investment in the Company’s most significant growth platforms.

It is further designed to reduce costs associated with direct materials, indirect expenses, and distribution and logistics, among other things.

Other major productivity, streamlining and divestment programs may also be required in the future to continue the turnaround plan.

Such programs may require the Company to implement a significant amount of organizational change, which could have a negative impact on employee engagement, divert management’s attention from other initiatives, and if not properly managed, impact the Company’s ability to retain key employees, cause disruptions in the Company’s day-to-day operations and have a negative impact on the Company’s financial results.

For example, in January 2023, the Company announced Project Phoenix, an initiative that aims to strengthen the company by leveraging its scale to further reduce complexity, streamlining its operating model and driving operational efficiencies.

It incorporates a variety of initiatives designed to simplify the organizational structure, streamline the company’s real estate, centralize its supply chain functions, transition to a unified One Newell go-to-market model in key international geographies, and otherwise reduce overhead costs.

The Company expects to realize significant savings when the initiatives are fully implemented, however it will result in material charges as well as the elimination of approximately 13% of office positions during 2023.

These initiatives may not be substantially completed in the expected timeframe, may be more costly to implement than expected, or may not fully achieve the anticipated cost savings.

Such programs involve a significant amount of organizational change, which could have a negative impact on employee engagement, divert management’s attention from other initiatives, and if not properly managed, impact the Company’s ability to retain key employees, cause disruptions in the Company’s day-to-day operations and have a negative impact on the Company’s financial results.

Further, the Company has pursued and may continue to pursue acquisitions of brands, businesses, or technologies from third parties.

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Any adverse change in the Company’s relationships with its third-party suppliers, the financial condition of third-party suppliers, the ability of third-party suppliers to manufacture and deliver outsourced parts or products on a timely basis, or the Company’s ability to import products from third-party suppliers or its own facilities could have a material adverse effect on the Company’s business, results of operations and financial condition.

In particular, the ongoing COVID-19 pandemic has resulted in significant disruption to the operations of certain suppliers and the related transportation of their goods to the United States that are parts of our global supply chain.

We have been able to make alternative delivery arrangements for limited quantities of goods, at increased cost.

However, we have experienced shortages in supply and if they were to be prolonged or expanded in scope, there could be resulting supply shortages that could materially and adversely impact our ability to manufacture and to deliver our products to our customers.

Accordingly, such supply shortages and delivery limitations could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

In addition, the financial condition of the Company’s vendors and suppliers may be adversely affected by general economic conditions, such as credit difficulties and the uncertain macroeconomic environment.

In addition, in some instances the Company maintains single-source or limited-source sourcing relationships, either because multiple sources are not available or the relationship is advantageous due to performance, quality, support, delivery, capacity or price considerations.

For example, certain businesses in the Baby business unit have a single source of supply for products that comprises a majority of their sales and which owns intellectual property rights in respect of many of those products.

For example, certain businesses in the Baby business unit have a single source of supply for products that comprise a majority of their sales and which owns intellectual property rights in respect of many of those products.

Any inability of the Company’s vendors and suppliers to timely deliver quality parts and products or any unanticipated change in supply, quality or pricing of products could be disruptive and costly to the Company.

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• marketing and selling products to consumers;

• collecting and storing customer, consumer, employee, investor and other stakeholder information and personal data, including data that may be subject to data privacy laws, including but not limited to the General Data Protection Regulation of the European Union (“GDPR”), the California Consumer Privacy Act (“CCPA”) or General Law for Protection of Personal Data (“LGPD”) of Brazil;

• collecting and storing customer, consumer, employee, investor and other stakeholder information and personal data, including data that may be subject to data privacy laws, including but not limited to the General Data Protection Regulation of the European Union (“GDPR”), the California Consumer Privacy Act (“CCPA”), the California Privacy Rights Act (“CPRA”) or General Law for Protection of Personal Data (“LGPD”) of Brazil;

• processing transactions;

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Increased IT security threats and cyber-crime, including advanced persistent threats, computer viruses, ransomware, other types of malicious code, hacking, phishing and social engineering schemes designed to provide access to the Company’s networks or data, pose a potential risk to the security of the Company’s IT systems, networks and services, as well as the confidentiality, availability and integrity of the Company’s data.

As an example, in 2021 a remote code execution vulnerability in Apache log4j was identified

as affecting large amount of systems worldwide.

Cyber threats are becoming more sophisticated, are constantly evolving and are being made by groups and individuals with a wide range of expertise and motives, increasing the difficulty of detecting and successfully defending against them.

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The Company’s operations, especially its retail operations, involve the storage and transmission of employees’, customers’ and consumers’ personal and sensitive information, such as credit card and bank account numbers.

The Company’s payment services may be subject to credit card and other payment fraud schemes, including unauthorized use of credit cards, debit cards or bank account information, identity theft or merchant fraud.

The Company’s payment services may be subject to credit card and other payment fraud schemes, including unauthorized use of credit cards, debit

cards or bank account information, identity theft or merchant fraud.

If the IT systems, networks or service providers relied upon fail to function properly, or if the Company suffers a loss or disclosure of customers’ and consumers’ data, business or stakeholder information, due to any number of causes, ranging from catastrophic events to power outages to security breaches, or the inability to effectively address these failures on a timely basis, the Company may suffer interruptions in its ability to manage operations, a risk of government enforcement action, litigation and possible liability, and reputational, competitive and/or business harm, which may adversely impact the Company’s results of operations and/or financial condition.

In addition, if the Company’s service providers, suppliers or customers experience a breach or unauthorized disclosure or system failure, their businesses could be disrupted or otherwise negatively affected, which may result in a disruption in the Company’s supply chain or reduced customer orders or other business operations, which would adversely affect the Company.

The Company is subject to laws of various countries where it operates or does business related to solicitation, collection, processing, transferring, storing or use of consumer, customer, vendor or employee information or related data, including the GDPR which went into effect in May 2018, the CCPA, which went into effect on January 1, 2020, and the LGPD which went into effect in August 2020.

The changes introduced by the GDPR, CCPA, and LGPD increase the complexity of regulations enacted to protect business and personal data, subject the Company to additional costs and have required, and may in the future require, costly changes to the Company’s security systems, policies, procedures and practices.

The Company’s operating results can be adversely affected by inflation, changes in the cost or availability of raw materials, energy, transportation and other necessary supplies and services, as well as the impact of tariffs.

We are currently experiencing inflationary pressures on our operating costs.

Among other things, competition for labor is becoming more acute and we have experienced increased labor costs as a result.

In addition, we have experienced increased costs from suppliers, and for the transportation of our products.

The Company is subject to laws of various countries where it operates or does business related to solicitation, collection, processing, transferring, storing or use of consumer, customer, vendor or employee information or related data, including the GDPR which went into effect in May 2018, the CCPA, which went into effect on January 1, 2020, the LGPD which went into effect in August 2020, the CPRA which became operative in January 2023 and various U.S.

state level privacy regulations.

The changes introduced by the GDPR, CCPA, LGPD, CPRA and U.S.

state laws increase the complexity of regulations enacted to protect business and personal data, subject the Company to additional costs and have required, and may in the future require, costly changes to the Company’s security systems, policies, procedures and practices.

The Company’s operating results can be adversely affected by inflation, changes in the cost or availability of raw materials, labor, energy, transportation and other necessary supplies and services, as well as the impact of tariffs.

Competition for labor is becoming more acute and we have experienced increased labor costs as a result.

There is no assurance that we will be able to fully offset any cost increases through cost reduction programs or price increases of our products, especially given the competitive environment.

If we generally are not able to sufficiently increase our pricing to offset these increased costs or if increased costs and prolonged inflation continue, it could materially and adversely affect our business, operating results and profitability.

If we generally are not able to sufficiently increase our pricing to offset these increased costs or if increased costs and prolonged inflation were to occur, it could materially and adversely affect our business, operating results and profitability.

Sustained price increases may lead to declines in volume as competitors may not adjust their prices or customers may decide not to pay the higher prices, which could lead to sales declines and loss of market share.

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Supply shortages for a particular type of material can delay production or cause increases in the cost of manufacturing the Company’s products.

domestic and international economic conditions, natural disasters, labor costs, production levels, competition, consumer demand, import duties and tariffs, currency exchange rates, international treaties, and changes in laws, regulations, and related interpretations.

Pricing and availability of finished goods, raw materials, energy, transportation and other necessary supplies and services for use in the Company’s businesses can be volatile due to numerous factors beyond its control, including general, domestic and international economic conditions, natural disasters, labor costs, production levels, competition, consumer demand, import duties and tariffs, currency exchange rates, international treaties, and changes in laws, regulations, and related interpretations.

Specifically, evolving trade policies could continue to make sourcing products from foreign countries difficult and costly, as the Company sources a significant amount of its products from outside of the United States.

Given the Company's reliance upon non-domestic suppliers, any significant changes to the United States trade policies (and those of other countries in response) may cause a material adverse effect on its ability to source products from other countries or significantly increase the costs of obtaining such products, which could result in a material adverse effect on our financial results.

Continued tariffs on Chinese-origin goods, or on certain products imported into the United States, or any extension of tariffs to additional categories of goods or to additional importers or exporters or additional countries of origin could significantly increase the cost of some our products and reduce our margins.

While the Company will continue to work to mitigate the tariff exposure, there can be no assurance that the Company's mitigation efforts will be successful.

Any additional tariffs on Chinese-origin goods, or on other certain products imported into the United States or, European Union carbon import taxes could increase the cost of some our products and reduce our margins.

Unfavorable shifts in industry-wide demand for the Company’s products could result in inventory valuation risk.

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Remaining inventory balances are adjusted to approximate net realizable market value.

If future demand or market conditions are less favorable than the Company’s estimates, inventory write-downs may be required.

If future demand or market conditions are less favorable than the Company’s estimates, including the volatility of customer demand patterns and the impact of retailer inventory rebalancing in response to softening global demand, write-downs may be required.

The Company cannot be certain that obsolete or excess inventories, which may result from unanticipated changes in the estimated total demand for its products, will not affect it beyond the inventory charges that have already been recorded.

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The Company’s success also depends, in part, on its continuing ability to attract, retain and develop highly qualified talent.

In 2021, the Company hired a President, e-Commerce and Digital, and a new Chief Accounting Officer.

In 2022 and 2023, the Company hired a new Chief Financial Officer and President, Brand Management and Innovation, respectively.

Competition for such talent is intense.

The Company’s success also depends, in part, on its continuing ability to attract, retain and develop highly qualified personnel.

Global competition for such personnel is intense and has increased in the recent past amidst emerging labor trends, including but not limited to increased remote work options.

There can be no assurance that the Company can retain its key employees or attract, assimilate, retain or otherwise develop internally other highly qualified personnel in the future.

There can be no assurance that the Company can retain its key employees or attract, retain or otherwise develop internally other highly qualified personnel in the future.

Damage to the Company’s reputation or loss of consumer confidence could have an adverse effect on the Company’s business .

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Additionally, due to the scale and scope of our business, we must rely on relationships with third parties, including our suppliers, distributors, contractors, and other external business partners for certain functions.

While we have policies and procedures for managing these relationships, they inherently involve a lesser degree of control over business operations, governance, and compliance, thereby potentially increasing our reputational and legal risk.

While we have policies and procedures for managing these relationships, they inherently involve less control over business operations, governance, and compliance, thereby potentially increasing our reputational and legal risk.

If third parties fail to comply with our policies and procedures or similar compliance requirements set forth by our customers, the Company could potentially suffer significant losses of business and revenue from certain customers.

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In addition, our global operations expose us to risks associated with public health crises, such as pandemics and epidemics, which could harm our business and cause our operational results to suffer.

For example, the COVID-19 pandemic negatively impacted our revenues in the first half of 2020 and the eventual duration and financial impact of the pandemic are still uncertain.

Further, the United Kingdom exited the European Union on January 31, 2020, after protracted political and economic negotiations, with a transition period lasting until December 31, 2020.

Following the termination of the transition period, the United Kingdom and the European Union entered into a trade and cooperation agreement to govern the future relationship between the parties, which was provisionally applied as of January 1, 2021 and entered into force on May 1, 2021 following ratification by the European Union.

Further, the United Kingdom exited the European Union in 2020 and entered into a trade and cooperation agreement with the European Union in 2021.

The trade agreement offers United Kingdom and European Union businesses preferential access to each other’s markets, ensuring imported goods will be free of tariffs and quotas.

However, economic relations between the United Kingdom and the European Union will now be on more restricted terms than before and there remains uncertainty around the post-Brexit regulatory environment.

As a result of Brexit, the global markets and currencies have been adversely impacted, including a decline in the value of the British pound as compared to the U.S.

A potential devaluation of the local currencies of our international customers relative to the U.S.

dollar may impair the purchasing power of our international customers and could cause international customers to decrease their volume of orders or cancel orders completely.

Brexit may also lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which E.U.

However, economic relations between the United Kingdom and the European Union are now on more restricted terms than before and there remains uncertainty around the post-Brexit regulatory environment.

Brexit may also lead to legal uncertainty and potentially divergent national laws and regulations as

the United Kingdom determines which E.U.

laws to replace or replicate, and those laws and regulations may be cumbersome, difficult or costly in terms of compliance.

Any of these effects of Brexit, among others, could adversely affect our business, financial condition, operating results and cash flows.

Additionally, if a potential devaluation of the local currencies of our international customers relative to the U.S.

dollar occurs, it may impair the purchasing power of our international customers and could cause international customers to decrease their volume of orders or cancel orders completely.

Should any of these risks occur, the Company’s ability to manufacture, source, sell or export its products or repatriate profits could be impaired.

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The Company has substantial indebtedness, which could materially and adversely affect the Company and its financial position, including decreasing its business flexibility, impacting its ratings and increasing its borrowing costs.

At December 31, 2021, the Company had $4.9 billion in outstanding debt, reflecting a reduction of approximately $721 million versus December 31, 2020.

At December 31, 2022, the Company had $5.4 billion in outstanding debt, reflecting an increase of approximately $490 million versus December 31, 2021.

The Company’s substantial indebtedness has, and could continue to have, important consequences for the Company, including:

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• placing the Company at a competitive disadvantage compared to its competitors that have less debt;

• limiting, along with the financial and non-financial covenants in the Company’s debt documents, its ability to borrow additional funds.

limiting its ability to borrow additional funds;

• requiring the Company to comply with financial and non-financial covenants in its debt documents that, if breached, subject the Company to cross-default and acceleration provisions.

In addition, if the Company is unable to timely reduce its level of indebtedness, the Company will be subject to increased demands on its cash resources, which could increase its total debt-to-capitalization ratios, decrease its interest coverage ratios, lower its credit ratings, result in a breach of covenants or otherwise adversely affect the business and financial results of the Company going forward.

An increase in interest rates could have a material adverse effect on the Company’s business.

While the majority of the Company’s debt is fixed, fluctuations in interest rates can increase borrowing costs on the portion that is variable, and interest rate increases on this portion of the Company’s debt could have a material adverse effect on the Company’s

Indeed, increases in interest rates would increase the cost of servicing our debt and could reduce our profitability and cash flows.

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However, the U.S.

Federal Reserve raised its benchmark interest rate nine times since December 2015, including four times in 2018, each time by a quarter of a percentage point, before reducing interest rates in 2019 three times.

Federal Reserve raised its benchmark interest rate nine times from December 2015 through the end of 2018, including four times in 2018, each time by a quarter of a percentage point, before reducing interest rates in 2019 three times.

In response to the COVID-19 pandemic, the U.S.

Federal Reserve reduced its benchmark interest rate to 0% in March 2020 before voting in November 2020 to keep short-term interest rates anchored in a range between 0% and 0.25%.

After holding rates constant in 2021 to support its policy of pandemic relief, on December 15, 2021, the U.S.

Federal Reserve signaled a reversal in policy, with at least three interest rate raises expected in 2022 to help curb inflationary pressures.

The policy statements and decisions of the U.S.

After holding rates constant in 2021 to support its policy of pandemic relief, the U.S.

Federal Reserve, in response to significant inflation, began its policy of increasing the target federal funds rate from effectively zero.

During 2022, the U.S.

Federal Reserve raised the targeted federal funds rate seven times for a total of 425 basis points resulting in a target range of 4.25% to 4.5%.

The policy statements, decisions and actions of the U.S.

Federal Reserve are uncertain and subject to change depending on economic conditions.

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Such a transition may be abrupt and may, among other things, reduce the availability and/or increase the costs of obtaining new debt and refinancing existing indebtedness.

An increase in interest rates or borrowing costs may also occur from changes in regulatory standards or industry practices, such as the contemplated transition away from the London Interbank Offered Rate (“LIBOR”) as a benchmark reference for short-term interest rates.

Such a transition may result in the usage of a higher reference rate for our variable rate debt.

Federal Reserve has sponsored the Alternative Reference Rates Committee (“ARRC”), which serves as a forum to coordinate and track planning as market participants currently using LIBOR consider (a) transitioning to alternative reference rates where it is deemed appropriate and (b) addressing risks in legacy contracts language given the possibility that LIBOR might stop.

On April 3, 2018, the U.S.

Federal Reserve began publishing three new reference rates, including the Secured Overnight Financing Rate (“SOFR”).

SOFR is observed and backward looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members.

Given that SOFR is a secured rate backed by government securities, it will be a rate that does not take into account bank credit risk (as is the case with LIBOR).

SOFR is therefore likely to be lower than LIBOR and is less likely to correlate with the funding costs of financial institutions.

ARRC has recommended SOFR as the alternative to LIBOR and published fallback interest rate consultations for public comment and a Paced Transition Plan to SOFR use.

The Financial Stability Board has taken an interest in LIBOR and possible replacement indices as a matter of risk management.

The International Organization of Securities Commissions (“IOSCO”), has been active in this area and is expected to call on market participants to have backup options if a reference rate, such as LIBOR, ceases publication.

The International Swaps and Derivatives Association (“ISDA”) has published guidance on interest rate benchmarks and alternatives in July and August 2018.

ISDA also published a protocol providing details of the fallback rate conversion methodology in October 2020.

It cannot be predicted whether SOFR or another index or indices will become a market standard that replaces LIBOR, and if so, the effects on our future results of operations or financial condition.

In October 2021, we entered into a Suspension of Rights Agreement with JPMorgan Chase Bank, N.A., as Administrative Agent for the lenders on the Credit Agreement, dated December 18, 2018 (the “Credit Agreement”), related to our Revolving Credit Facility.

Under the Suspension of Rights Agreement, we agreed that borrowings in GBP, EUR and CAD or with an interest period that uses 2-month USD LIBOR will not be available, without consent of the required lenders, until the Credit Agreement is amended to provide for an alternative benchmark rate to replace LIBOR.

Any such borrowings would be deemed to be amended to select USD as the currency or to have selected to use 1-month USD LIBOR as the interest period.

These uncertainties regarding the possible cessation of LIBOR or their resolution and our current inability to borrow in foreign currencies could adversely impact our interest expense, funding costs, net interest margin, loan and other asset values, asset-liability management strategies, and other aspects of our business and financial results.

Reductions in the Company’s credit ratings could materially and adversely affect its business, financial condition and results of operations.

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(“S&P”) upgraded the Company’s debt rating to “BBB-” from “BB+” as S&P believed the Company has been able to achieve S&P’s target debt level.

As a result of this upgrade, the Company will again be in a position to

access the commercial paper market, and the interest rates on certain of its outstanding senior notes will be reduced by 25 basis points on an annualized basis.

As a result of this upgrade, the Company has been in a position to access the commercial paper market, and the interest rates on certain of its outstanding senior notes were reduced by 25 basis points on an annualized basis.

However, any future downgrade by S&P below “BBB-” or further downgrade by Moody’s would further increase the Company’s borrowing costs and continue to adversely affect the Company’s financial results.

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If the Company’s short-term ratings were to be further lowered, it would limit, or eliminate entirely, the Company’s access to the commercial paper market.

The ratings from credit agencies are not recommendations to buy, sell or hold the Company’s securities, and each rating should be evaluated independently of any other rating.

See Liquidity and Capital Resources in Item 7 .

On February 14, 2023, Fitch Ratings downgraded the Company’s debt rating to “BB”.

This downgrade does not impact the interest rates on any of the Company's senior notes.

The ratings from credit agencies are not recommendations to buy, sell or hold the Company’s securities, and each rating should be evaluated independently of any other rating.

Failure to maintain effective internal control over financial reporting could result in material misstatements in our financial statements, and our failure to meet our reporting and financial obligations, which in turn could have a negative impact on our financial condition.

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The Company is required under U.S.

GAAP to review its amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable, and are also required to conduct impairment tests on goodwill and other indefinite-lived intangible assets annually or more frequently, if circumstances indicate that the carrying value may not be recoverable or that an other-than-temporary impairment exists.

During the years ended December 31, 2021, 2020 and 2019, the Company recorded non-cash impairment charges related to goodwill and indefinite-lived intangibles of $60 million, $1.5 billion and $1.2 billion, respectively, in continuing operations and $112 million, in discontinued operations in 2019.

GAAP to review its long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable, and are also required to conduct impairment tests on goodwill and other indefinite-lived intangible assets annually or more frequently, if circumstances indicate that the carrying value may not be recoverable or that an other-than-temporary impairment exists.

During the years ended December 31, 2022, 2021 and 2020, the Company recorded non-cash impairment charges related to goodwill and indefinite-lived intangibles of $474 million, $60 million and $1.5 billion, respectively.

Future events or factors may occur that would adversely affect the fair value of the Company’s assets and require impairment charges.

Such events or factors may include, but are not limited to, divestitures of certain businesses or product lines, strategic decisions made in response to changes in economic and competitive conditions, the impact of the economic environment on the Company’s sales and customer base, a material adverse change in the Company’s relationship with significant customers or business partners, or a sustained decline in the Company’s stock price.

Such events or factors may

include, but are not limited to, divestitures of certain businesses or product lines, strategic decisions made in response to changes in economic and competitive conditions, the impact of the economic environment on the Company’s sales and customer base, a material adverse change in the Company’s relationship with significant customers or business partners, or a sustained decline in the Company’s stock price.

In the event any such impairment indicators become known or are present, the Company may be required to perform impairment tests based on changes in the economic environment and other factors, and these tests could result in impairment charges in the future.

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The Company may decide to sell or discontinue certain businesses or product lines in the future based on an evaluation of performance and strategic fit.

On February 6, 2022, the Company signed a definitive agreement to sell its CH&S business unit to Resideo Technologies, Inc., for a purchase price of $593 million, subject to customary working capital and transaction adjustments.

This transaction is expected to be completed by the end of the first quarter of 2022, subject to customary closing conditions, including regulatory approval.

On March 31, 2022, the Company sold its CH&S business unit to Resideo Technologies, Inc., for a purchase price of $593 million, subject to customary working capital and transaction adjustments.

Divestitures or discontinuations of businesses or products may result in asset impairments, including those related to goodwill and other intangible assets, and losses upon disposition, both of which could have an adverse effect on the Company’s results of operations and financial condition.

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The Company previously disclosed that it had received a subpoena and related informal document requests from the U.S.

and Exchange Commission (the “SEC”) primarily relating to its sales practices and certain accounting matters for the time period beginning from January 1, 2016.

See Footnote 18 of the Notes to the Consolidated Financial Statements for further information.

The Company also received a subpoena relating to disclosures on the potential impact of U.S.

Treasury regulations in June 2021, as further described below.

Securities and Exchange Commission (the “SEC”) primarily relating to its sales practices and certain accounting matters for the time period beginning from January 1, 2016.

The Company cooperated with the SEC in connection with its investigation and requests for documents, testimony and information.

In late January 2023, the Company began discussing with the SEC the possibility of reaching a settlement to resolve the investigation, which now focuses on the time period between the third quarter of 2016 through the second quarter of 2017.

Further, on June 30, 2021, the Company received a subpoena from the SEC requesting the production of documents relating to disclosures on the potential impact of U.S.

Treasury regulations, as further described below.

Responding to governmental investigations, voluntary document requests, subpoenas or actions by regulatory bodies may be time-consuming, expensive and disruptive to the Company’s operations and could divert the attention of management and key personnel from the Company’s business operations.

See Footnote 18 of the Notes to Consolidated Financial Statements for further information.

The Company’s businesses and operations are subject to regulation in the U.S.

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The Company believes it has strong arguments in favor of its position and believes it has met the more likely than not recognition threshold that its position will be sustained.

However, due to the inherent uncertainty involved in challenging the validity of regulations as well as a potential litigation process, there can be no assurances that the relevant Regulations will be invalidated or that a court of law will rule in favor of the Company.

On June 30, 2021, the Company received a subpoena from the SEC requesting the production of documents related to its disclosure of the potential impact of the U.S.

Treasury regulations, as further described in Footnote 11 - Income Taxes of the Notes to the Consolidated Financial Statements.

However, due to the inherent uncertainty involved in challenging the validity of

regulations as well as a potential litigation process, there can be no assurances that the relevant Regulations will be invalidated or that a court of law will rule in favor of the Company.

See Footnote 12 of the Notes to Consolidated Financial Statements.

The resolution of the Company’s tax contingencies may result in additional tax liabilities, which could adversely impact the Company’s cash flows and results of operations.

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However, future events, such as changes in existing laws or policies or their enforcement, or the discovery of currently unknown contamination, may give rise to additional remediation liabilities that may be material.

See “Environmental Matters” in Footnote 18 of the Notes to Consolidated Financial Statements for a further discussion of these and other environmental-related matters.

Environmental Matters are described further in Footnote 18 of the Notes to Consolidated Financial Statements for a further discussion of these and other environmental-related matters.

The Company’s business involves the potential for product recalls, product liability and other claims against it, which could affect its earnings and financial condition.

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When the Company is required to remove, or voluntarily removes, its products from the market, the Company’s reputation could be tarnished and the Company might have large quantities of finished products that it could not sell.

The Company also faces exposure to product liability claims in the event that one of its products is alleged to have resulted in property damage, bodily injury or other adverse effects.

The Company also faces exposure to product liability claims if one of its products is alleged to have resulted in property damage, bodily injury or other adverse effects.

In addition to the risk of substantial monetary judgments or fines or penalties that may result from any governmental investigations, product liability claims or regulatory actions could result in negative publicity that could harm the Company’s reputation in the marketplace, adversely impact the value of its end-user brands, or result in an increase in the cost of producing the Company’s products.

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Additionally, the Company does not maintain product recall insurance and may not have insurance coverage for claims asserted in consumer class action lawsuits that seek monetary compensation unrelated to personal injury and/or property damage, such as claims related to the marketing or warranty of the product.

As a result, product recalls, product liability claims and other product-related claims could have a material adverse effect on the Company’s business, results of operations and financial condition.

As a result, product

recalls, product liability claims and other product-related claims could have a material adverse effect on the Company’s business, results of operations and financial condition.

The Company spends substantial resources ensuring compliance with governmental and other applicable standards.

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The Company cannot give assurance, however, that its future product liability experience will be consistent with its past experience or that claims and awards subject to self-insured retention will not be material.

See Footnote 18 of the Notes to the Consolidated Financial Statements for a further discussion of these and other regulatory and litigation-related matters.

If the Company fails to adequately protect its intellectual property rights, competitors may manufacture and market similar products, which could adversely affect the Company’s market share and results of operations.

See Footnote 18 of the Notes to Consolidated Financial Statements for a further discussion of these and other regulatory and litigation-related matters.

If the Company fails to adequately protect its intellectual property rights, competitors may manufacture and market the same or similar products, which could adversely affect the Company’s market share and results of operations.

The Company’s success with its proprietary products depends, in part, on its ability to protect its current and future technologies and products and to defend its intellectual property rights, including its patent, trade secret and trademark rights.

If the Company fails to adequately protect its intellectual property rights, competitors may manufacture and market similar products.

If the Company fails to adequately protect its intellectual property rights, competitors may manufacture and market the same or similar products.

The Company holds numerous design and utility patents covering a wide variety of products.

The Company cannot be sure that it will receive patents for any of its patent applications or that any existing or future patents that it receives or licenses will provide competitive advantages for its products.

The Company cannot be sure that it will receive patents for any of its innovations or that any existing or future patents that it receives or licenses will provide competitive advantages for its products.

The Company also cannot be sure that competitors will not challenge and potentially invalidate any existing or future patents that the Company receives or licenses.

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If the Company is found to have violated the trademark, trade secret, copyright, patent or other intellectual property rights of others, directly or indirectly, such a finding could result in the need to cease use of such intellectual property in the Company’s business, as well as the obligation to pay for past infringement.

If rights holders are willing to permit the Company to continue to use such intellectual property rights, they could require a payment of a substantial amount for continued use of those rights.

If rights holders are willing to permit the Company to continue to use such intellectual property rights, they could require a payment of a substantial amount for such continued use.

Either ceasing use or paying such amounts could cause the Company to become less competitive and could have a material adverse effect on the Company’s business, financial condition, and results of operations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors